2017 TRID Changes & Clarificationsfic-webinars.s3.amazonaws.com/bc360-07.5-Handouts.pdf · or eliminate the closing costs to the Borrower on the LE by the amount of the Seller Credit

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Copyright © FIC Conferences, Inc. www.ficconferences.com

2017 TRIDChanges & Clarifications

Optional Compliance – October 2017Lenders may implement all at once or phase in

Mandatory Compliance – October 2018

Effective for Applicationson or after October 1, 2018


Escrow Closing Notice&

Partial Payment Disclosure requirements apply

starting October 1, 2018regardless of when an application

has been received


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Cooperatives

TRID Disclosures must be provided for closed-end consumer loans secured by a cooperative unit regardless of whether or not state law classifies the coop’s as real property


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Trusts & TrusteesTrusts & Trustees are considered the same person for Reg Z

Right of Rescission must be provided to each person who has the Right to Rescind

LE & CD may include signature lines & insert Trustee’s name below, along with designation of Trustee for Trust


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Housing Assistance LoansReg Z provides partial exemption from TRID

requirements for low-cost, non-interest bearing, subordinate lien housing assistance loans that satisfy 6 criteria

Revises 2 of 6 – regarding costs payable by the consumer at consummation without loss of eligibility for the partial exemption


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Revises 2 of 6 criteria- Transfer Taxes, in addition to recording,application, and housing counseling fees, maybe payable by the consumer at consummationwithout losing eligibility for the partialexemption; and

- Recording Fees & Transfer Taxes areexcluded from the 1% cap on total costspayable by the consumer at consummation


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Prior to 2017 Rule…If a valid Change in Circumstance

occurred after the CD had been provided, a revised CD could be used to reset the tolerances BUT only if it was less than 4 business days prior to consummation

(Revised LE may not be provided once CD is provided)


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“Black Hole”This became known as the “black hole”

because a revised CD could not be provided if there were 4 or more days prior to consummation.

If the creditor waited until there were less than 3 business days, then the revised disclosure would be out of compliance because it must be provided within 3 business days of the Change in Circumstance.


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The 4 business day requirement has now been removed and allows the tolerances to be reset via a valid Change in Circumstance and a revised Closing Disclosure any time after the initial Closing Disclosure has been sent


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Best Information Reasonably AvailableThe best information reasonably available

standard (i.e., there is no tolerance limit on charges if they are based on the best information reasonably available) applies to bona fide 3rd party charges if:- Consumer is permitted to shop, &- Consumer selects provider not on the list, &- Estimated charges are best informationreasonably available, even if paid to affiliates


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Revised Loan Estimates are allowed for informational purposes as well as to reset the tolerances but any revised LE requires all fees to be based on the “best information reasonably available” at the time of re-disclosure

Any revised LE for informational purposes have the same delivery requirements of 4 business days prior to consummation and 1 business day prior to the receipt of the CD


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10% Cumulative ToleranceThe 10% cumulative tolerance applies

to a required 3rd party non-affiliate settlement charge, even if the creditor failed to disclose on the written list of providers or the written list was not provided at all, as long as the consumer is permitted to shop


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0% Zero ToleranceZero 0% tolerance applies to required settlement service charges paid to anyone, if, based on the relevant facts & circumstances, the consumer was not permitted to shop


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When fees are not disclosed, or they are disclosed with unreasonably low estimates, it results in these fees being placed in the Zero 0% tolerance category, regardless of whether or not the consumer did in fact shop for the service providerCopyright © FIC Conferences, Inc. www.ficconferences.com

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Other Good Faith RequirementsEstimates for Charges that are not required by the creditor should be the best information reasonably available, for example:

-Property Taxes & Insurance-Amounts placed in Escrow-Prepaid Interest


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Again, if creditor does not provide an estimate

or estimates are unreasonably low, then

the fee is subject to ZERO tolerance testing


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Example: Creditor discloses unreasonably low estimated settlement agent fee of $20 when the average prices for the area are $150. The under-disclosure does not comply with “good faith” standards

Example: Creditor consistently discloses property taxes at $75/mo. but average for the area are $450/mo. The estimate does not comply with “good faith” standards


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Written List of Service Providers

If consumer is permitted to shop, but creditor fails to provide “written list of service providers” or provides a non-compliant list, these fees fall

into 10% tolerance category


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If re-disclosure is issued due to a valid change in circumstance which results in a new fee the consumer is

permitted to shop for but creditor fails to provide “written list of

service providers” or provides a non-compliant list, these fees fall into

10% tolerance category


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If a consumer is NOT permitted to shop, these

fees fall into the Zero tolerance category


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Optional ServicesFees for optional services or those which are not subject to tolerance, remain in the no tolerance category, even if the service provider is the creditor or one of it’s affiliates, So long as…

consumer is permitted to shop, and

written list of service providers is providedwithout affiliates listed


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Settlement Cost Expiration Date on LEIf a revised LE is issued after consumer

indicates “intent to proceed” the expiration date & time are left blank on the revised Loan Estimate – failure to leave this section blank is a violation

Creditor may voluntarily extend the expiration date either orally or in writing, allowing a

longer period of time for the “intent to proceed”


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Rate LockIf rate is locked, a revised LE must be provided within 3 business days of a written Rate Lock Agreement, even if

none of the fees have changed

If CD has been issued, a revised CD will only need to be provided if the CD

becomes inaccurate


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Simultaneous Subordinate LienIf CD for the first lien loan has all the required disclosures related to the seller, then:

- Seller may be provided with onlyfirst lien CD instead of also providing theseller with subordinate lien loan CD- Summary of Seller’s Transactiontable does not apply to the CD for thesimultaneous subordinate lien loan- Seller’s name & address may be leftblank on the CD for subordinate lien loan


Creditor may use optional alternative disclosures when disclosing simultaneous subordinate lien loan If alternative is used, must use on LE & CD

If alternative is used, contributions towardsubordinate lien loan from seller must beincluded in the CD for both the first lien (inSummaries of Transaction table) andsubordinate lien (in Payoffs & Paymentstable)


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PurchaseIn a purchase transaction involving a simultaneous subordinate lien loan, the purpose of the subordinate lien loan is disclosed as “Purchase” as long as the loan is secured by the purchased property


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Funds from Subordinate Lien Loan

Funds from the subordinate lien loan are included in Adjustments and Other Credits calculation on the LE for the first lien, and are disclosed in the Summaries of Transactions table on the CD for the first lien


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Unless using the optional alternative LE or CD to disclose the simultaneous

subordinate lien loan, the sales price is not disclosed in the

Summaries of Transactions table for the CD or the Calculating Cash to Close calculations for the LE or CD for the simultaneous lien loan


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Separation of Consumer & Seller Information on Closing Disclosure

Creditor may:- Leave the applicable disclosure blank(Summaries of Transaction Table) on the formprovided to the other party;- Omit the table or label, as applicable, for theform provided to the other party; or- Provide the seller, a modified version of theform provided in appendix H


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Seller Closing Disclosure must be provided no later than the day of

consummation reflecting the actual terms of the seller’s transaction

If provided as a separate document by settlement agent, the creditor

must be provided with a copy


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Regulation P & Gramm-Leach-Bliley ActPermits TRID-required sharing of information without providing notice of such information sharing and an opportunity to opt-out of such sharing

GLBA provides an exception that applies if a financial institution’s sharing of its customers’ non-public personal information is required, or is a usual, appropriate, or acceptable method to provide the customer or the customer’s agent or broker with a confirmation, statement, or other record of the transaction, or information on the status or value of the financial service or financial product.


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Other Disclosures in the Loan Estimate Loan Amount is the face amount of the Note

If no seller & creditor has it’s own estimate of theproperty value, it must use it’s own estimate

If accurate, creditor can indicate that a portion oftaxes, insurance & assessments will be paid withescrow funds

If multiple changes to periodic P&I payments may occur in a single year, creditor combines thechanges & discloses them as a single range ofpaymentsCopyright © FIC Conferences, Inc. www.ficconferences.com

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Loan Estimate cont’d Creditor should disclose $0.00 (not $0) for prepaid

interest if, based on best information available,creditor does not believe it will collect prepaid interest

Total Interest Percentage (TIP) includes prepaidinterest the consumer will pay but does not includeprepaid interest someone else will pay

TIP is the Total amount of interest the consumer willpay over the life of the loan, expressed as apercentage of the principal of the loan - Prepaidinterest that is disclosed as a negative number isincluded as a negative value when calculating the TIP


Seller CreditsSpecific seller credits can either reduce or eliminate the closing costs to the Borrower on the LE by the amount of the Seller Credit or Creditors can disclose the total amount of the closing costs as Borrower Paid with a Seller Credit

Non-Specific Seller Credits that do not pay for a particular fee will be disclosed in the Cash to Close table as “Seller Credits”


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Example: If Seller has agreed to pay for a $350. Survey Fee, the Creditor may disclose the whole $350. Survey Fee in Section B or C (based on whether or not the Consumer may shop), and the corresponding credit under the Calculating Cash to Close Seller Credits; the Creditor may alternatively choose to completely omit disclosing the fee, indicating that the specific Seller credit will cover the fee in its entirety.


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Lender CreditsConsistent with the terms of the legal obligation between the creditor and the consumer, both specific and general lender credits are disclosed as a negative number and labeled “Lender Credits” on the Loan Estimate


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Other Disclosures in the Closing DisclosureBorrower(s)Only the names and addresses of the persons to whom credit is offered or extended are disclosed at the top of the first page of the CD with the label “Borrower.” The CD must be provided to each party with the Right to Rescind; however, those who are not applying for credit will not be listed as Borrowers. For Creditors who opt to include signature lines on the CD, signature lines for all parties with the Right to Rescind may be provided.


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Disbursement DateIn a purchase transaction, the disbursement date is generally based on when the final Cash to Close amount will be paid to the Seller or Consumer. If dates differ, either is acceptable. In a non-purchase transaction, the disbursement date is based on when some of the proceeds or the entire loan amount is expected to be paid to a third party, or the Consumer. In the case of a simultaneous subordinate lien, the disbursement date is based on when some or the entire loan amount is expected to be paid to a third party (excluding the Settlement Agent), or the Consumer.


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Taxes & Other Government FeesThe total amount of fees for recording deeds and security instruments must each be disclosed on the first line under the subheading “Taxes and Other Government Fees,” and the total amounts paid for all recording fees must be disclosed in the applicable column. If the creditor chooses, it can itemize the individual recording fees, and is permitted to do so on a separate addendum, consistent with the preexisting rule.


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Prepaid Interest

The creditor should disclose “$0.00” (not $0) for prepaid interest if, based on the “best information available,” the creditor does not believe it will collect prepaid interest.


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Cash to Close TableClosing Costs Financed (Paid from your Loan Amount):If a standard Closing Disclosure is used for a simultaneous subordinate purchase transaction, then sales price is excluded from any calculations in the Cash to Close table.


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Down Payment/Funds From Borrower & Funds for Borrower:In a purchase money transaction, down payment and other funds from borrower will now be calculated by subtracting the loan amount and any other existing loans (i.e., subordinate financing) from the sales price.

In a purchase money transaction, if the calculation of the Down Payment/Funds From Borrower results in a positive number or $0, the amount disclosed for Down Payment/Funds From Borrower will be $0.


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If the loan amount in a simultaneous subordinate lien loan or a purchase-plus transaction, or the sum of the current loan and any additional loan assumed or taken subject to, exceeds the sales price on a purchase transaction, that amount will be determined under Funds for Borrower.

Now allows Funds for Borrower field in a purchase transaction.


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In non-purchase transactions, the current loan and any additional loan assumed or taken subject to, excluding closing costs financed, is subtracted from the amount of all existing debt being satisfied. A positive result is disclosed as Funds from Borrower and negative amount is disclosed as Funds for Borrower.


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Treatment of Seller CreditsIf there is a difference between the amount of seller credits disclosed on the LE and the CD, not attributed to rounding, there must be a statement at the consumer should see details of the credits. There are options for the statements disclosed under the heading “Did this Change?” based on whether the seller credit is general, specific or both.


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Adjustments & Other CreditsThe 2017 Rule does not require amounts provided in advance of the real estate closing by third parties not otherwise involved in the transaction (such as gifts by family members) to be disclosed in the Summaries of Transactions table, and as a result, they will not be included in the Adjustments and Other Credits calculation.


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Disclosure of Payoffs of Existing Liens & Unsecured DebtIf the creditor is not using the alternative LE & CDs, payoffs of existing liens and unsecured debts are disclosed as follows:

- On the LE for some transactions, including some purchase transactions, these amounts are factored into the Funds for Borrower calculation. Otherwise, these amounts are factored into the Adjustments and Other Credits calculation. - On the CD, these amounts are disclosed in the Summaries of Transactions table and, for some transactions (including some purchase transactions), are factored into the Funds for Borrower calculation. Otherwise, these amounts are factored into the Adjustments and Other Credits calculation.


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Payoffs & Payment Table

The amount applied from a simultaneous subordinate lien loan to the first lien loan is shown in the

Estimated Total Payoffs and Payments on the LE and in the

Payoffs and Payments Table on the Subordinate financing CD


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The proceeds of a simultaneous subordinate lien loan are included in the Estimated Total Payoffs and Payments in the Calculating Cash to Close Table on first lien loans eligible for the Alternative Loan Estimate, such as a refinancing


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The total in the Payoffs and Payments table can now be a negative number, which would be a positive number in the Cash to Close table.

If there is a seller contribution on a simultaneous subordinate financing transaction disclosed on an alternative LE/CD, the amount of the seller contribution can be disclosed in the Payoffs and Payments table as a negative figure/credit.

Credits from third parties may be shown in the Payoffs and Payments table as credits.


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Escrow TableEstimated Property Costs over 1 Year

includes the amounts in Taxes, Insurance and Assessments as well as

any amounts for ongoing Mortgage Insurance premiums


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Estimated Property Costs over 1 Yearmay include a varied number of

months, depending on the Creditor’s interpretation of the number of

months being calculated based on the date of consummation, or the

Consumer’s initial payment date


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Total of Payments Disclosure

Tolerances for the Total of Payments disclosure mirror the tolerances applicable to the finance charge

It is considered accurate if it is overstated or if it is understated by no

more than $100


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Treatment of Lender CreditsLender credits identified as cures for tolerance violation may be disclosed as a negative number and labeled “Lender Credits” in Section J of the Closing Costs table, or Lender credits may be applied as a principal reduction.


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Principal Reductions(also known as Principal Curtailments)

Principal reductions that occur immediately or very soon after closing are reflected in the Summaries of Transaction Section L under Adjustments, or the Payoffs and Payments table of the alternative format.

Clarification was provided on specific labeling for principal reductions


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The specific labeling for principal reductions to include:• The amount of the reduction;• The phrase “principal reduction” or a similar phrase;• If applicable, the phrase “Paid Outside of Closing” or

“POC,” & the name of the party making the payment;• If used for purposes of curing a tolerance violation, a

statement that the principal reduction is provided tooffset the increase above legal limits; and

• If being provided on the alternative format, the nameof the payee.

Example“$500. Principal Reduction for exceeding legal limits POC Lender”


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If enough space is not available in the Adjustments or Payoffs and Payments section, an addendum may be provided to the Consumer. An abbreviated disclosure will be required in Adjustments or on the Payoffs and Payments table.

Principal reductions that are not paid with closing funds will be labeled in the same fashion as those paid with closing funds; however, the amounts will not be used in computing Calculating Cash to Close, Summaries of Transactions totals, or Payoffs and Payments totals.


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Use of Positive & Negative Numbers for Certain Disclosures in the LE & CD

The 2017 TILA-RESPA Rule permits the use of positive and negative numbers, if applicable, for the amounts disclosed (or used to calculate the disclosures) for:

Total Closing Costs

Payoffs and Payments

Adjustments and Other Credits


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Rounding in the LE & CDThe exact percentage amounts in the following disclosures are rounded to three decimal places: Certain Loan Terms table disclosures - the Interest Rate &

percentages under the subheading “Can this amount increase after closing?”

Certain Loan Costs - the points disclosed in Section A. Origination Charges

Certain Other Costs - the percentage disclosed for the Prepaid Interest amount

The Adjustable Interest Rate (AIR) table – all rates Certain Comparisons table disclosures - the Annual

Percentage Rate (APR) and the Total Interest Paid (TIP)


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Any trailing zeroes to the right of the decimal are not included in the disclosure (i.e., 1.05%, not 1.050%).

Per diem interest amounts disclosed in Prepaids and monthly amounts disclosed in the Initial Escrow Payment at Closing are not rounded to the nearest dollar, but are rounded to the nearest whole cent (i.e., Prepaids - $15.45 per day for 15 days @ 3.125% -Section G. Initial Escrow Payment at Closing –Monthly amounts - $175.54 per mo. for 2 mo.)


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In the CD in Section F. Prepaids: The creditor should disclose “$0.00” (not “$0”) for Prepaid Interest if, based on the best information available, the creditor does not believe it will collect interest for a period between closing and the date from which interest will be collected with the first monthly payment.

For the Final amount in the Funds for Borrower disclosure in the CD Calculating Cash to Close table, if the calculation results in zero, the number is disclosed as a $0 (not $0.00).


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Corrected Closing Disclosure

Post-Consummation CD’s are not required if the only charges that changed

are per diem interest & disclosures affected by per diem interest –

If providing for other reasons the corrected per diem should be disclosed


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Construction/Permanent Loans


Finance Charges, Points & Fees for Constructionphase must be allocated to the Construction phaseFinance Charges, Points & Fees for Permanentphase must be allocated to the Permanent phase

Example: Inspection and handling fees for the staged disbursement of construction loan proceeds must be included in the disclosures for the construction phase and may not be included in the disclosures for the permanent phase

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If creditor charges an origination fee for construction financing only but charges a greater origination fee for construction/permanent financing, the difference between the two fees must be allocated to the permanent phase.

All other finance charges and points & fees must be allocated to the permanent financing.

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Fees & charges that are not used to compute the finance charge or

points & fees may be allocated between the transactions in any

manner the creditor chooses

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LE Timing & Delivery


Construction Only ApplicationLE must be provided within 3 business daysOne Application for Construction/PermanentSeparate LE must be provided within 3 business daysof Construction/Permanent Application or CombinedLE must be provided within 3 business days Construction Application received on one date and

Permanent Loan Application received on a later dateLE issued for the construction loan and permanent loan within three business days from the respective application dates

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Inspection & Handling

Construction inspection & handling charges collected at or before

consummation are disclosed in the loan costs table, and that such

costs are collected after consummation are disclosed in a

separate addendum


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Construction Loansthat are NOT Purchases


(i.e. loan to build where no land is being purchased)

LE may include the estimated value of theimprovements to be madeCD must include the value of the propertyused for the approval, includingimprovements if used to determine theapproval of the transaction

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Construction/Permanent


Disclosed as a Single TransactionLoan Estimate shows combined loan term forexample 12 month construction and 30 year permanentis disclosed as 31 years

Disclosed as Two Separate TransactionsLoan Estimate for the permanent phase begins on thedate that interest for the permanent phase’s periodicpayments begin to accrue, regardless of when the loanis disclosed

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Multiple Advance Construction


A one-year fixed rate interest only construction loan is disclosed as:

11 mo Interest Only, Fixed Rate

A fixed rate construction/permanent loan with a 12 month interest only construction period is disclosed as:

1 Year Interest Only, Fixed RatePage 20


When disclosing a construction/permanent loan separately, the permanent loan is disclosed as a fixed rate, if the rate remains the same as the construction phase.

When disclosing a construction/permanent loan separately, if the interest rate may adjust at the time of conversion to the permanent phase (i.e., based on an index), the permanent phase is disclosed as an adjustable rate even if the interest rate will then remain fixed for the life of the permanent loan and will require an ARM payment change notice at least 60 days prior to conversion. Page 20

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Alternative LE – Cash to ClosePayoffs & Payments


When using the Alternative LE, totalconstruction costs are reflected in theEstimated Total Payoffs and Payments in theCalculating Cash to Close table.Amounts from the borrower, such as part ofthe funds for the construction contract or anyother amount paid by third parties will beincluded as positive number.

Closing DisclosureSummaries of Transactions - Borrower:


The amount disclosed in Section KAdjustments includes the total constructioncosts (i.e. contract). (1026.38(j)(1)(v) – 2)The amount disclosed in Section LAdjustments would include any amountalready paid on the construction contract.(1026.38(j)(2)(vi))

Projected Payments Table


The interest only payment disclosed in theProjected Payments table is disclosed ascalculated according to Appendix D.On a combined construction/permanentdisclosure the first column in the ProjectedPayments table reflects the interest only paymentduring the construction phase and if theconstruction phase is less than one year, the firstcolumn also reflects the amortizing payments, andmortgage insurance and escrow payments, if any,for the permanent phase. The interest only paymentis calculated using the Appendix D assumptions.

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Projected Payments Table


On a combined construction/permanent disclosurein the Projected Payments table when the firstcolumn exclusively discloses the constructionphase, the creditor discloses “0” in the first columnof the projected payments table for mortgageinsurance and a hyphen or dash in the first columnof the projected payments table for escrow.Conversely, when the first column disclosesconstruction phase and the permanent phasepayments, the amount of the mortgage insurancepremium or escrow payment (if any) for thepermanent phase is disclosed in the first column.

Loan Terms:


Requires a YES answer to whether payments can increase after closing on multiple advance loans when the timing of advances is unknown.

When answering YES, it will require the disclosure of “Adjusts every mo. starting in mo. 1” and “Can go as high as $[insert maximum possible periodic principal and interest payment] in year 1”. Month or years can be used as appropriate.

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AP Table


Also requires the insertion of an AP table. Interest Only Payment will be answered YES. The amount or range of payments will be left blank in the First Change/Amount disclosure, but will disclose the first change as 1st Payment. Subsequent Changes will reflect “Every Month” and the Maximum Payment will disclose the maximum possible interest payment “Starting at 1st Payment”

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Clarification on Construction Costs


Requires the disclosure of the entireamount of construction costs whether theloan proceeds will pay all or part of thosecosts.

The construction costs on the LE arefactored into the Funds for Borrowercalculation similar to any other existingdebt of the borrower being satisfied by thetransaction.

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The creditor has the option to disclose any construction reserve account established by thecreditor as either a separate line item or togetherwith the construction costs. If a reserve account isdisclosed as a separate line item, the labeling ofthe reserve account needs to meet the “clear andconspicuous” standards.

Any inspection and handling fees disclosed on theaddendum for the Loan Estimate and ClosingDisclosure must be included in the calculation ofthe “In 5 Years” and “Total of Payments”disclosures, respectively.

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Thank you for your participation!

Documents

2017 TRID Changes & Clarificationsfic-webinars.s3.amazonaws.com/bc360-07.5-Handouts.pdf · or eliminate the closing costs to the Borrower on the LE by the amount of the Seller Credit